The DCIT, Circle-6, Ahmedabad V. M/s. Techno Industries , Ahmedabad

ITA 1019/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8298 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 22-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K DEV SR DR
• Assessee Lawyers: PRAVIN R SHAH
• Keywords: Business income
• Section: 143(3); 133(6)

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 1019/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) THE DCIT, CIRCLE-3(2), ROOM NO. A-509, 5 TH FLOOR, PRATYAKSHA KAR BHAVAN, NR. PANJRA POLE, AMBAWADI, AHMEDABAD-380015 / VS. M/S. TECHNO INDUSTRIES PLOT NO. 613, PHASE- IV, GIDC ESTATE, VATVA, AHMEDABAD- 382445 ' ./ # ./ PAN/GIR NO. : AACFT1503D ( '$ / APPELLANT ) .. ( % '$ / RESPONDENT ) '$ & / APPELLANT BY : SHRI S.K. DEV, SR. DR % '$ ' & / RESPONDENT BY : SHRI PRAVIN R. SHAH, AR () ' * / DATE OF HEARING 27/02/2018 +,-. ' * / DATE OF PRONOUNCEMENT 15 / 05 /2018 // O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME ITA NO.1019 /AHD /2015 TECHNO INDUSTRIES VS. DCIT ASST.YEAR 2011-12 - 2 - TAX(APPEALS) DATED 27.02.2015 ARISING IN THE ASS ESSMENT ORDER DATED 27.03.2014 PASSED BY THE ASSESSING OFFICER U NDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT) CONCER NING ASSESSMENT YEAR 2011-12. 2. THE SHORT ISSUE IN THE CAPTAINED APPEAL INVOLVES DISALLOWANCE OF COMMISSION EXPENSES OF RS. 32,65,628/-. 3. BRIEFLY STATED THE ASSESSEE, A PARTNERSHIP FIRM, DERIVES BUSINESS INCOME FROM SALE OF CAPITAL GOODS. THE ASSESSEE HAS DECLARED A BUSINESS TURNOVER OF RS. 19.23 CRORES DURING THE YE AR AND DECLARED TAXABLE INCOME OF RS. 67,24,730/-. THE RETURN FILED BY THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSES SEE HAS INTER ALIA CLAIMED COMMISSION EXPENSES OF RS. 32,65,628/-. THE ASSESSING OFFICER MADE CERTAIN ENQUIRIES REGARDING THE GENUIN ENESS AND BUSINESS PURPOSES OF THE COMMISSION EXPENSES SO CLA IMED. FOR THIS PURPOSE, THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO ALL THE 18 PARTIES TO WHOM ASSESSEE HAS CLAIMED TO HAVE PAID COMMISSION. THE ASSESSING OFFICER OBSERVED THA T ONLY 04 PARTIES RESPONDED TO THE AFORESAID NOTICES AND THAT TOO DID NOT FILE THE CRUCIAL DETAILS CALLED FOR SUCH AS DETAILS OF SERVICES PROV IDED TO THE ASSESSEE. THE ASSESSING OFFICER IN THESE BROAD FACTS HELD THA T EXPENSES CLAIMED ITA NO.1019 /AHD /2015 TECHNO INDUSTRIES VS. DCIT ASST.YEAR 2011-12 - 3 - BY THE ASSESSEE ON ACCOUNT OF COMMISSION IS NOT PRO VED. THE ASSESSING OFFICER ACCORDINGLY RELIED UPON THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF LAXMINARAYAN MADAN LAL VS. CIT (1972) 86 ITR 439(SC) AND DISALLOWED THE EXPENSES C LAIMED BY THE ASSESSEE. WHILE DOING SO, THE ASSESSING OFFICER ALS O OBSERVED THAT MAJORITY OF PARTIES HAVE NOT EVEN CONFIRMED THE FAC TUM OF RECEIPT OF COMMISSION. THE ASSESSEE HAS FAILED TO PROVE THE NE XUS BETWEEN ITS BUSINESS AND THE EXPENSES INCURRED. THE PARTICULARS OF SERVICES RENDERED AGAINST COMMISSION IS NOT PLACED ON RECORD . THE ASSESSING OFFICER OBSERVED THAT PAYMENT TO THE RECIPIENT BY C HEQUE AND DEDUCTION OF TDS THEREON IS OF NO CONSEQUENCE TO ES TABLISH THE GENUINENESS AND BUSINESS PURPOSE OF THE EXPENSES CL AIMED. 4. AGGRIEVED BY THE DISALLOWANCE OF COMMISSION EXPE NSES, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CI T(A) REVISITED THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOUND THAT PAYMENT OF COMMISSION TO BE GENUINE. THE CIT(A) INTER ALIA OBSERVED THAT THE ASSESSEE HAS PROVIDED THE NAMES AND ADDRESSES OF TH E AGENTS, THEIR PAN NUMBERS AS WELL AS NATURE OF SERVICES RENDERED. THE CIT(A) NOTED THAT SIMILAR NATURE OF COMMISSION HAS BEEN PA ID TO THE PARTIES IN THE EARLIER YEARS AND THEREFORE EXPENSES OUGHT TO HAVE BEEN ALLOWED. THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE EXISTENCE OF THE PERSON TO WHOM COMMISSION HAS BEEN PAID AND HAS ITA NO.1019 /AHD /2015 TECHNO INDUSTRIES VS. DCIT ASST.YEAR 2011-12 - 4 - NOT ESTABLISHED THAT THE PAYMENT OF COMMISSION WAS NOT FOR THE BUSINESS PURPOSES. THE CIT(A) ACCORDINGLY REVERSED THE ACTION OF THE ASSESSING OFFICER AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS SCORE. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING FO R THE REVENUE CONTENDED THAT THE CIT(A) HAS MIS-DIRECTED ITSELF IN LAW AND FACTS IN COMING TO THE CONCLUSION OF GENUINENESS WI THOUT ANY SUBSTANTIVE MATERIAL IN THIS REGARD. THE LD. D.R SU BMITTED THAT MERE PAYMENT BY CHEQUE AND DEDUCTION OF TDS WOULD NOT PER SE ESTABLISH GENUINENESS WHERE THE ASSESSEE HAS FAILED TO MEET T HE RELEVANT PARAMETERS SUCH AS RENDITION OF SERVICES. THE LD. D .R ALSO CONTENDED THE CIT(A) HAS WRONGLY SOUGHT TO SHIFT THE ONUS TO THE ASSESSING OFFICER WHEREAS THE INITIAL ONUS LAY UPON THE ASSES SEE TO ESTABLISH THE BONA FIDE AS WELL AS THE BUSINESS PURPOSES. THE LD. D.R CONT ENDED THAT A MERE GENERAL AVERMENT TOWARDS CLAIM OF OBTAI NING SERVICES FROM SUCH AGENTS WITH REFERENCE TO INCREASE IN TURN OVER ETC. IS NOT SUFFICIENT TO HOLD INFERENCE IN FAVOUR OF THE ASSES SEE. IT WAS SUBMITTED THAT THE ONUS SQUARELY LAY UPON THE ASSESSEE WHICH WAS NOT DISCHARGED AT ANY STAGE OF THE PROCEEDINGS. THE LD. D.R ACCORDINGLY ITA NO.1019 /AHD /2015 TECHNO INDUSTRIES VS. DCIT ASST.YEAR 2011-12 - 5 - URGED THAT THE APPELLATE ORDER OF THE CIT(A) ON THE ISSUE INVOLVED REQUIRED TO BE SET ASIDE AND THE ACTION OF THE ASSE SSING OFFICER REQUIRES TO BE RESTORED. 7. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE, ON THE OTHER HAND RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE ON ITS PART HAD GIVEN COMPLETE PARTY WISE DETAILS SHOWING PAYMENTS MADE AND DEDUCTION OF TDS THEREON AND ALSO THE NATURE OF SERVICES WERE PROVIDED. THE LD. A.R SUBMITTED THAT MANY OF THE PARTIES HAVE BEEN PAID COMMISSION IN THE EARLIER YE ARS ALSO AND MANY PARTIES HAVE BEEN PAID COMMISSION IN THE SUBSEQUENT YEARS ALSO FOR SIMILAR THE SERVICES AVAILED. THE LD. A.R ACCORDING LY SUBMITTED THAT NO INTERFERENCE WITH THE ORDER OF THE CIT(A) IS CAL LED FOR. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND MATERIALS PLACED ON RECORD. THE SOLITARY ISSUE THAT CONFRONTS US IN THE PRESENT APPEAL IS MAINTAINABILITY OF COMMISSION EXP ENSES. 9. IN THIS REGARD ON NAVIGATION THROUGH FACTS WE NO TICE THAT THE ASSESSING OFFICER HAS ATTEMPTED TO MAKE ENQUIRIES B Y ISSUING STATUTORY NOTICES TO THE RECIPIENTS OF THE COMMISSI ON. THE ASSESSING OFFICER OBSERVED THAT ONLY 04 PARTIES OUT OF 18 PAR TIES HAVE RESPONDED AND FILED PARTIAL UN-VOUCHED DETAILS WITHOUT SHOWIN G ANY NEXUS ITA NO.1019 /AHD /2015 TECHNO INDUSTRIES VS. DCIT ASST.YEAR 2011-12 - 6 - TOWARDS SERVICES AND THE CORRESPONDING BUSINESS. TH E ASSESSING OFFICER HAS REFUSED TO ACCEPT THE PAYMENT BY CHEQUE AND DEDUCTION OF TDS AS DETERMINATIVE FACTOR FOR ESTABLISHING GENUIN ENESS OF SUCH EXPENSES AND RIGHTLY SO. THE INITIAL ONUS IS ALWAYS OF THE ASSESSEE TO ESTABLISH THE BONA FIDE OF COMMISSION EXPENSES WHEN CALLED UPON TO DO SO. A MERE FURNISHING OF BASIC DETAILS OF PARTIE S AND MODE OF PAYMENT DOES NOT NECESSARILY SHIFT THE ONUS ON THE REVENUE. IT WAS ALWAYS FOR THE ASSESSEE TO COME OUT WITH THE DETAIL S OF SERVICES OBTAINED AGAINST THE EXPENSES CLAIMED. THE INCREASE IN TURNOVER BY ITSELF IS NOT CONCLUSIVE ALTHOUGH MAY SOMEWHAT INDI CATE NEED FOR PRESENCE OF SUCH SERVICES. IT IS VERY SURPRISING TH AT CIT(A) HAS ACCEPTED THE CASE MADE OUT BY THE ASSESSEE AS A GOS PEL TRUTH WITHOUT MAKING ANY ENQUIRY ON LACK OF RESPONSE FROM MAJORIT Y OF PARTIES AND INADEQUACY IN IMPORTANT DETAILS CALLED FOR FROM THO SE RECIPIENT PARTIES. IT IS MANIFEST THAT CIT(A) HAS INCORRECTLY APPRECIA TED THE FACTS AND WRONGLY SHIFTED THE ONUS ON THE ASSESSING OFFICER T O ESTABLISH THAT THE PAYMENT OF COMMISSION WAS NOT FOR THE PURPOSES OF B USINESS AND FURTHER SHIFTED THE RESPONSIBILITY ON THE ASSESSING OFFICER TO PROVE THAT SERVICES WERE NOT RENDERED BY THE COMMISSION A GENTS. THE ONUS ON THE FACT THAT THE EXPENSES WERE INCURRED FOR THE PURPOSES OF BUSINESS AND SERVICES WERE ACTUALLY RENDERED ALWAYS LAY ON THE ASSESSEE. THUS THE ACTION OF THE CIT(A) DOES NOT ST AND TO REASON. THE HONBLE SUPREME COURT IN THE CASE OF LAXMINARAYAN M ADANLAL ITA NO.1019 /AHD /2015 TECHNO INDUSTRIES VS. DCIT ASST.YEAR 2011-12 - 7 - (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE CASE. THE REND ITION OF SERVICES MUST BE PROVED AS A MATTER OF FACT WHEN CA LLED FOR. THE FACT THAT THE COMMISSION EXPENSES WERE ALLOWED IN A DIFF ERENT YEAR WAS FOUND TO BE IRRELEVANT BY THE HONBLE SUPREME COURT IN THE CASE OF GANAPATHY AND COMPANY VS. CIT 381 ITR 363 (SC). THE MERE PAYMENT BY CHEQUE DOES NOT TIE DOWN THE ASSESSING O FFICER TO HOLD THAT THE PAYMENT WAS EXCLUSIVELY FOR THE PURPOSES O F BUSINESS. IT IS TRUE THAT THE ASSESSEE, AT TIMES HAS NO COMMAND OVE R THE PARTIES WHO HAVE RENDERED SERVICES TO PUSH THEM FOR COMPLIANCE OF THE STATUTORY NOTICES. HOWEVER AT THE SAME TIME THE ASSESSEE IS E XPECTED TO BRING ON RECORD SOME MATERIAL (VIZ CORRESPONDENCES, E-MAI LS, PATTERN OF COMMISSION PAYMENTS AND ITS NEXUS TO CORRESPONDING SERVICES OR BUSINESS GARNERED, QUALIFICATION AND EXPERIENCES OF COMMISSION AGENTS SHOWING THEIR EXPERTISE AND CAPABILITIES ETC . TO LIST A FEW) WHICH MAY CORROBORATE WITH THE SUPPLY FACILITATED OWING TO SUCH SERVICES BY PARTIES WITH SOME PARTICULARS/DETAILS. 10. THE CIT(A) IN OUR VIEW HAS WRONGLY ACCEPTED THE CONTENTIONS OF THE ASSESSEE PERFUNCTORILY WITHOUT MAKING OR CAU SING TO MAKE ANY REQUISITE ENQUIRY IN THIS REGARD. THEREFORE, WE FIN D MERIT IN THE PLEA RAISED ON BEHALF OF THE REVENUE THAT ACTION OF THE CIT(A) IS NOT IN TUNE WITH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF ITA NO.1019 /AHD /2015 TECHNO INDUSTRIES VS. DCIT ASST.YEAR 2011-12 - 8 - THE ASSESSING OFFICER FOR DETERMINATION OF ISSUE AF RESH AFTER MAKING SUCH ENQUIRIES AS HE MAY CONSIDER EXPEDIENT TO ASCE RTAIN THE GENUINENESS OF THE CLAIM TOWARDS COMMISSION EXPENSE S AND ITS NEXUS IN RELATION TO THE BUSINESS OF THE ASSESSEE. NEEDLE SS TO SAY, THE ASSESSING OFFICER SHALL DETERMINE THE ISSUE IN ACCO RDANCE WITH THE LAW AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE IN THIS REGARD. 11. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 15 / 0 5/ 201 8 SD/- SD/- ( ) ( ) (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 15/05/2018 MUKUL !' #' / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. % '$ / THE RESPONDENT. 3. 234* 5* / CONCERNED CIT 4. 5* ( ) / THE CIT(A)-5, AHMEDABAD 5. 678 *(34 , 34. , 9 2 / DR, ITAT, AHMEDABAD 6. 8 :) / GUARD FILE. $ % / BY ORDER, &/% '( ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 17.1.18 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.1.18